EU Member States adopt declaration on the termination of all bilateral investment treaties


On 15 January 2019, representatives of EU Member States made the first formal step towards ending bilateral investment protection treaties signed between EU Member States (“intra-EU BITs”) when they signed the Declaration of the Representatives of the Governments of the Member States on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment protection in the European Union (the “Declaration”). By this step, Member States have confirmed full respect for the Court’s ruling in the Case C-284/16 Achmea (the “Achmea judgement”) which declared intra-EU BITs to be incompatible with the legal order of the Union.

According to the Achmea judgment, the dispute settlement mechanisms set out in intra-EU BITs and implementation of the Energy Charter Treaty (the “ECT”) within the EU are incompatible with EU law. As a result, twenty-two of the twenty-eight EU Member States (Belgium, Bulgaria, Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, the Netherlands, Austria, Poland, Portugal, Romania, Slovakia and the UK), have now committed to take all necessary steps to formally terminate intra-EU BITs and will not conclude any new ones. They have also pledged to notify arbitral tribunals of the non-arbitrability of claims arising from or in connection with such BITs and Energy Charter Treaty claims; and to request to set-aside related intra-EU awards. Nonetheless, although general media assign much higher importance to the Declaration, from the perspective of public international law, the Declaration has no direct legal power and did not and cannot terminate or modify the existing intra-EU BITs. The Declaration is simply an expression of the intention of the Member States to terminate these treaties in the future. In addition, with regard to the ECT, the Member States are still to form a joint position on the consequences of the Achmea judgment.

The Declaration complements the earlier Commission Communication on the protection of cross-border investments within the Capital Markets Union, issued on 19 July 2018, confirming that investors from EU Member States are fully protected in the Single Market by EU law and the protection of these rights is ensured by the EU national courts and the European Court of Justice. The Declaration does not change the legal situation for intra-EU investment disputes for now. On the other hand, the Member States’ aim is to deter investors from bringing new investment claims by announcing that their home states will challenge the relevant proceedings. This will, inter alia, increase the potential costs of arbitral proceedings until the stage of enforcement, thereby rendering intra-EU arbitrations unattractive. Interestingly, Member States implicitly recognise that a functioning system is being abolished without equivalent legal protection – in particular with regard to judicial protection – being put in place. On this basis they have announced the intention to discuss and possibly create new mechanisms for intra-EU investment protection. Whether, when or how this will happen is still unclear.

The Czech Ministry of Foreign Affairs confirmed that the signing of the Declaration is a confirmation of a long-standing position of the Czech Republic, which has firmly maintained there is no space for intra-EU BITs in the EU Single Market. A different position has been taken by Hungary, which has adopted a separate version of the Declaration regarding the effect of the Achmea case on the investor-State arbitration clause contained in the ECT, which may be fuelled by pending disputes. Also other states including Finland, Luxembourg, Malta, Slovenia and Sweden, jointly signed a separate version of the Declaration departing from the majority on the same issue concerning the impact of the Achmea judgment on the applicability of the ECT arbitration clause. The different views on the extent of the applicability of the Achmea case may potentially result in investors seeking more arbitration friendly jurisdictions in the future, however for now the Declaration might be considered as an inappropriate measure of the European Commission and the respective Member States and interfere with ongoing arbitral proceedings.